Question

On June 30, 2021, Blondie Fixtures was considering alternatives to bolster its cash position. Option One called for transferring $350,000 in accounts receivable to Dogwood Finance Company without recourse for a 5% fee. Option Two calls for Blondie to transfer the $350,000 in receivables to Dogwood with recourse. Dogwood's charges a 4% fee for receivables factored with recourse. Option Two meets the conditions to be considered a sale, but Blondie estimates a $2,500 recourse liability. Under either option, Dogwood will immediately remit 90% of the factored receivables to Blondie, and retain 10%. When Dogwood collects the remaining receivables, it remits the amount, less the fee, to Blondie. Blondie estimates that the fair value of the final 10% of the receivables is $22,500 (ignoring the factoring fee) Required: 1. Prepare any necessary journal entry or entries if receivables are factored under Option One. 2. Prepare any necessary journal entry or entries if receivables are factored under Option Two.

Answer 1

solution particulars Debit Gredit 315000 cash (90% X 350000) Loss on sale of receivable (boffg) 30000 5000 Recevable Accounth from factor "C22500 -5% of 350000) recelvable 350000

Debit Gedet 315000 29000 Particulars Cash (90% X 350000) Lossa on sale of receivable (botig) Receivable from factor (22500–49. of 350000) Recourse teabilety I Accounts receivable 8500 2500 350000